Free-Trade Agreement Without Free Trade

AUBURN, ALABAMA. — Auburn, Alabama -- The North American Free Trade agreement has been hailed by free-marketeers across America. That's what can happen when you believe the government.

Far from being what U.S. Trade Representative Carla Hills calls "another splendid achievement" of "market-opening trade policy," this 2,400-page monstrosity is a triumph only for government-managed trade and the special interests that benefit from it. Maybe that's why the treaty is available for public viewing only a few hours a week, by appointment, in a room staffed with cranky clerks who resent mere citizens interrupting their $40,000-a-year conversations.


Written by a cabal of lawyers from government and big business, the treaty enables government to micro-manage what should be free. Nine hundred pages of tariff schedules cover everything from "concrete pumps for liquids, not filled with a measuring device from 36 up to 60 m3-hr capacity" to "twill weave polyester staple fiber fabric 85 percent synthetic staple fiber, with cotton, 170g-m2, printed."

The few real benefits take 15 years to go into effect, while the costs, such as protectionist "rules of origin," are visited upon us immediately. High tariffs will be levied on all cars that are not at least 62.5 percent North American-made. This provision is designed to bar the Japanese cars we do want, while allowing us to buy the Mexican cars we don't want.


Ms. Hills gets to the heart of the scam when she says that the "rules of origin ensure that only North American-made products obtain the benefits of free trade." Trade is not free if the government is deciding who benefits.

Politicians find it easy to promise good things, like lower tariffs, 15 years from now. But who believes that a trade agreement negotiated by Jimmy Carter would be taken seriously today? We can only guess at what kind of government the United States, Canada or Mexico will have in the year 2008.

The simple passage of time, which means new economic development, new technologies, new taste and new resources, will also have an effect. The free market easily adjusts to these changes by means of the price system. In assuming that government officials can know the economic and technological future, this treaty is as silly as the old Soviet five-year plans.

Under real free trade, which we should have, companies can export and import without government hindrance, and consumers can buy all the foreign-made goods they want without paying extra.

Real free trade would allow Los Angeles consumers to drive to Mexico, fill their cars with goods and cross the U.S. border with only a wave from the guards. Try that today, and you land in jail. Try it under NAFTA and you still land in jail.

The American shopping malls on the U.S.-Canada borders have piles of old clothes in their parking lots because that's the only way Canadians can drive back across the border with new American clothes without being arrested. NAFTA does not change that either.

In fact, NAFTA does a North American hat dance on the graves of Adam Smith, David Ricardo, Henry George and Ludwig von Mises -- the great champions of free trade.

These economists argued that international trade should be no different from domestic trade. Market exchanges benefit everyone, whether across international borders or across town; foreign competition is no more "dangerous" to America than domestic competition; and competition, whatever its source, is good for the consuming public.


Most important, free trade, like other aspects of the free market in general, requires no government management. There is no need for "free-trade" legislation between Amoco and my car. California and Arizona need no agreement for their businesses to trade. Consumers in Alabama can buy whatever they want from Nevada.

Ms. Hills says that this treaty will help people move "from the shadow of government control into the light of liberty." That's exactly what we need, but we will only get it when Washington is forced to forget about managed trade agreements and cut taxes, spending and regulation. When they do that, Ms. Hills & Co. deserve to be taken seriously, unlike when they proclaim international wheeler-dealing as free trade.

As part of the "new world order," NAFTA also erects a supranational bureaucracy to manage North American commerce. That alone tells us that it's not free trade. Given its real nature, and the effect it will have on most American businesses and consumers, maybe we should call this treaty SHAFTA.

Llewellyn H. Rockwell Jr. is president of the free-market Ludwig von Mises Institute. He wrote this commentary for the Los Angeles Times.